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Comment by missedthecue | Hacker News Reader

A free market does not mean that both sides want something with equal desire. I need food to survive much more than Krogers needs my business to survive. This does not mean that grocery sales are not a free market.

A free market means that the supply and demand of goods rely on price signals rather than a centralized planner. Labour is absolutely a free market. As wages in one particular area increase, people respond to that price signal by learning the relevant skills and working in that field and getting greater salaries. It's also why Amazon (and essentially no business) pay $7.25 an hour, even though they legally could.

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Free markets are also free of monopolies, and generally expect the actors how have good “information” about the market.

This simply isn’t true for the labour market, ignoring the monopoly aspect for the moment, workers don’t have good market information.

Worker pay is usually heavily obfuscated by employers so it’s almost impossible for an individual worker to accurately gauge how much they can demand.

Addition workers have very limited time and resources to spend on gather information on the labour market. How are they supposed to discover better paying jobs, or better industries without constantly job hunting?

Compare this to companies who in comparison have a huge amount data. At a minimum they know the wages of all their employees, they also have the resources to be constantly surveying the labour market and adjusting to it.

All of this compounds to produce a heavily skewed labour market, that skews in the favour of employers.

The free market is very good at solving information asymmetries of the kind you are talking about. If it isn't being solved, it's probably because of regulation (regulatory capture). Or maybe it isn't a real problem.

I'm going to guess in this case it's more the latter than the former.

I've always considered this a very naive idea of how a free market works. It ignores how irrational and short-sighted humans can be, not to mention that many consumers are price sensitive.

A free market will not solve climate change as long as coal and fossil fuels are inexpensive.

A free market prioritizes one thing: Profit. That is all. A free market only solves problems when it is profitable to do so. Yeah, charities exist, but they typically aren't big enough to solve the big problems on a big scale.

This is an unbalanced opinion of free markets (but I generally agree with downsides of unregulated capitalism).

> Profit. That is all.

Free markets also have intense competition so "Profits" that you talk about don't just go out of control - Prices are set at the intersection of supply and demand curves. Companies would need to shave off profit margins to stay competitive.

I think it is fair to say that there are no ideal free markets. There are always asymmetries, downsides, side cashing and a whole bunch of complexities in any market - nothing is ideal.

So, we should have regulations that control those asymmetries.

I think you're reading more into what I said, than what I actually said. But I also think part of what I said was dumb, so I partially agree with you.

You just restored a little bit of my faith in humanity. Thank you.

> The free market is very good at solving information asymmetries of the kind you are talking about.

No, it's not.

This view was already expressed, except with some elaboration, hours before your comment. Why add to the noise with a post like this? Saying "no" is what the downvote button is for.

> Free markets are also free of monopolies

Usually, that's covered by the adjective “perfectly competitive” rather than “free” modifying “markets”, but it is an aspect of textbook idealized markets.

> I need food to survive much more than Krogers needs my business to survive

Yes, but you can buy from anywhere other than Krogers and the cost of switching is almost negligible. A job is very, very different in that regard.

Responding to your edit:

> As wages in one particular area increase, people respond to that price signal by learning the relevant skills and working in that field and getting greater salaries.

Learning the relevant skills costs time and money. If your wage is too low, you won't be able to learn new skills. And moving and changing jobs is not that easy for most people.

Yes, but you can buy from anywhere other than Krogers and the cost of switching is almost negligible. A job is very, very different in that regard.

It doesn't matter who I buy from, I need food much more than any retailer needs my business. I can sell my labour to many different companies with a relatively low switching cost. The average time people between jobs is lower than it has ever been.

Learning the relevant skills costs time and money. If your wage is too low, you won't be able to learn new skills. And moving and changing jobs is not that easy for most people.

If the price of steel increased, building new mines to extract iron ore would cost great sums of money as well. It is not easy for all mining companies to do this. It doesn't mean that the market is not relying on price signals to coordinate the production of goods.

> I can sell my labour to many different companies with a relatively low switching cost.

Well, I disagree on this. Maybe you specifically can do it, but housing prices, healthcare costs, transport cost, family charges, etc, can make the cost and risk of switching prohibitive. Not to mention that "just switching" doesn't mean prices will be better. Just have a look at the latest stats on working poor people to imagine whether those can easily switch jobs and get better education.

> If the price of steel increased, building new mines to extract iron ore would cost great sums of money as well. It is not easy for all mining companies to do this. It doesn't mean that the market is not relying on price signals to coordinate the production of goods.

So there's a high cost of entry? That's very much a non-perfect market. A free market doesn't just "respond to price signals", that's a very low threshold as you'll hardly find a market that doesn't respond in any way to price changes. A free market has to respond to them in an elastic way.

Free market is not the same thing as a perfectly competitive market

> people respond to that price signal by learning the relevant skills and working in that field and getting greater salaries

Many people stay in jobs they don't like or that don't pay enough because they need the healthcare or don't have the resources (including time) to learn new skills and move to a higher paying job. So the fact that people can't freely respond to price signals means that it is not a free market.

Again, a free market doesn't mean that everyone can easily buy or sell any good or service. Plenty of things prohibit this, including geographical challenges, language barriers, import tariffs, and other natural and contrived barriers to trade.

A free market means that the distribution and production of goods and services do not rely on centralized planning, but on price signals.

Ok, maybe labor is technically a "free market" because the price signals exist and there is no centralized planning, but the issue still is that there are too many barriers for labor to move around.

Y'all might be using different meanings for the word "free".

As for being stuck in a job for health or skill reasons, those are choices, crappy choices but still free choices.

Universal Healthcare would, IMO, do more for the worker than a nominal pay-rise. The link between employment and healthcare is an abomination.

I would personally rephrase the previous comment as one of choice: for a free market to function you must have a reasonable choice to say "yes" or "no"; if you're strongly incentivised (or even forced) towards saying "yes", then that's not a very free market.

And that what's skewed here: as a (low-income) labourer, I often don't have all that much choice but to say "yes" since my bargaining power and alternatives are extremely limited. Often times people can't really "compare options".

>A free market means that the supply and demand of goods rely on price signals rather than a centralized planner.

That's one definition but it's not one of the more common ones.

It also begs the question what counts as a centralized planner. Does Boeing count if it sets the price of jet planes that only it and Airbus sell? What about when Singapore fixes the price of medical care even though anybody who wants can cross the border to have it done? Or Venezuela that fixes the price of its own money - at a rate literally nobody pays?

Not even sure if Boeing and Airbus are good examples considering that both are intimately tied with the state.

Sure, but you don’t need food from Kroger’s. You can get it from 100s of places.

And what happens when those signals are distorted?

Remove the state and there are still many things that can go wrong with a market. Price signals become a way of laundering this fact past a certain point.

> Labour is absolutely a free market.

In what sense is a market with price controls absolutely a free market?

You're right that price controls obfuscate the mechanism on which pricing signals work, but it's not central planning.

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